Isle ethanol outlook sours

Fuel from sugar crops could lose profitability, the USDA contends

Sugar-based ethanol, an alternative fuel that Hawaii is pursuing as part of its overall strategy for reducing dependence on oil, might not be profitable in the long term, a new government study says.

The report from the U.S. Department of Agriculture and Louisiana State University indicates recent spot market prices of $4 per gallon could make conversion of sugar cane, sugar beets, raw sugar and refined sugar to ethanol profitable now, but it probably will not be for long.

Spot market prices, which have reached record highs in recent weeks, are expected to drop as more ethanol is produced from other sources, chiefly corn.

"Based on current future prices, the price of ethanol could drop to $2.40 per gallon by the summer of 2007, making it unprofitable to produce ethanol from raw and refined sugar," the report said. "Molasses, from either sugar cane or sugar beets, was found to be the most cost-competitive feedstock."

The report looks at the viability of sugar-based ethanol on a national scale.

Although no ethanol is being made in Hawaii right now, local supporters say Hawaii's economy is isolated and unique enough that ethanol production could serve the dual purpose of reducing overall oil consumption and reviving the isles' agriculture industry.

The first processing plants are expected to come online by the second quarter of next year.

At least one processor, Oahu Ethanol Corp., plans to convert molasses until it can start growing sweet sorghum as a feedstock. Other ethanol producers are working with sugar companies Gay & Robinson on Kauai and Alexander & Baldwin Inc.'s Hawaii Commercial & Sugar Co. on Maui to secure crops to convert to fuel.

Critics say ethanol and other biofuels are expensive to create, are not as efficient as traditional energy sources and will do little to displace oil consumption.

But Hawaii and other states, even oil companies and automakers, are pushing forward with ethanol and other alternative fuel initiatives.

Hawaii is getting some federal help as it embarks on implementing recently adopted energy security proposals.

U.S. Sen. Daniel Akaka's office announced yesterday that four federal and state agencies are teaming up to study Hawaii's dependence on oil and whether alternatives are technically and economically feasible.

Last week, Akaka announced Senate committee approval of $1 million for an ethanol demonstration project in Hawaii. The bill is pending full Senate action and Senate-House conference proceedings.

The multiagency study plans to examine all areas where Hawaii might be able to reduce its dependence on oil -- such as in electricity generation -- not just in the area of transportation fuel.

"I would think all of the areas will be looked at, and those that look most promising would get more attention than those that don't have as much potential for Hawaii," said Rick Rocheleau, director of the Hawaii Natural Energy Institute and a member of the Energy Policy Forum, two of the groups taking part in the oil dependence assessment.

The study, authorized under the federal Energy Policy Act of 2005, also includes the U.S. Department of Energy and the state Department of Business, Economic Development and Tourism. A final analysis is expected by March.

Rocheleau said it is too early to say what might result from the study.

"In my mind, it would help to identify what the feasible options are," he said. "Going from feasible options to policies and then actual implementation -- there are a lot of other steps."

Experts estimate that Hawaii relies on imported fossil fuels for about 90 percent of its energy needs.

The statistic was widely cited this year as lawmakers and Gov. Linda Lingle enacted a series of proposals aimed at reducing Hawaii's dependence on imported oil. The strategy aims to reduce oil consumption in the islands through conservation and development of alternative fuels and renewable energy technology.